The Australian dollar faced losses on Wednesday after the country’s central bank dismissed the possibility of a near-term rate hike. The Reserve Bank of Australia’s stance on keeping rates steady for now caused bond yields to drop and futures to reduce the likelihood of a rate increase to just 13%.
Adam Boyton, head of Australian economics at ANZ, stated, “It all implies the hurdle to another hike could be higher than markets have been expecting.” He predicted a potential easing cycle to begin in November, with three rate cuts in total.
Contrary to other major central banks, the Australian market is not pricing in a rate cut until April next year, with only one quarter-point easing expected by October. This more hawkish outlook sets the Australian dollar apart from currencies like the US dollar and Euro, which are expected to see cuts in the near future.
Despite some support around $0.6575, the Australian dollar faces a technical barrier at $0.6650. The New Zealand dollar remained stable at $0.5990, above last week’s low of $0.5875.
Australian bond futures rose slightly, with 10-year bond yields down 17 basis points for the week at 4.25%. No major economic data is expected from Australia or New Zealand this week, with the next notable release being Australian wage figures on May 15.
Investors are looking towards Chinese trade figures and a Bank of England policy meeting for further direction in the market. The Australian dollar’s future remains uncertain as global economic conditions continue to evolve.